MIRA INFORM REPORT

Report Date :

12.03.2013

IDENTIFICATION DETAILS

Name :	HUBEI HONGYUAN PHARMACEUTICAL CO., LTD.

Registered Office :	No. 428, Yishui North Road, Fengshan Town, Luotian County, Hubei Province 438600 Pr

Country :	China

Financials (as on) :	31.12.2010

Date of Incorporation :	21.01.2002

Com. Reg. No.:	421123000005111

Legal Form :	Limited Liabilities Company

Line of Business :	Manufacturing and selling active pharmaceutical ingredients and intermediates.

No. of Employees :	500

RATING & COMMENTS

MIRA’s Rating :

RATING		STATUS	PROPOSED CREDIT LINE
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory

Status :	Satisfactory
Payment Behaviour :	No Complaints
Litigation :	Clear

NOTES :

Any query related to this report can be made on e-mail: infodept@mirainform.com while quoting report number, name and date.

ECGC Country Risk Classification List – March 31^st, 2012

Country Name

Previous Rating

(31.12.2011)

Current Rating

(31.03.2012)

China

Risk Category	ECGC Classification
Insignificant	A1
Low	A2
Moderate	B1
High	B2
Very High	C1
Restricted	C2
Off-credit	D

CHINA - ECONOMIC OVERVIEW

Since the late 1970s China has moved from a closed, centrally planned system to a more market-oriented one that plays a major global role - in 2010 China became the world's largest exporter. Reforms began with the phasing out of collectivized agriculture, and expanded to include the gradual liberalization of prices, fiscal decentralization, increased autonomy for state enterprises, creation of a diversified banking system, development of stock markets, rapid growth of the private sector, and opening to foreign trade and investment. China has implemented reforms in a gradualist fashion. In recent years, China has renewed its support for state-owned enterprises in sectors it considers important to "economic security," explicitly looking to foster globally competitive national champions. After keeping its currency tightly linked to the US dollar for years, in July 2005 China revalued its currency by 2.1% against the US dollar and moved to an exchange rate system that references a basket of currencies. From mid 2005 to late 2008 cumulative appreciation of the renminbi against the US dollar was more than 20%, but the exchange rate remained virtually pegged to the dollar from the onset of the global financial crisis until June 2010, when Beijing allowed resumption of a gradual appreciation. The restructuring of the economy and resulting efficiency gains have contributed to a more than tenfold increase in GDP since 1978. Measured on a purchasing power parity (PPP) basis that adjusts for price differences, China in 2010 stood as the second-largest economy in the world after the US, having surpassed Japan in 2001. The dollar values of China's agricultural and industrial output each exceed those of the US; China is second to the US in the value of services it produces. Still, per capita income is below the world average. The Chinese government faces numerous economic challenges, including: (a) reducing its high domestic savings rate and correspondingly low domestic demand; (b) sustaining adequate job growth for tens of millions of migrants and new entrants to the work force; (c) reducing corruption and other economic crimes; and (d) containing environmental damage and social strife related to the economy's rapid transformation. Economic development has progressed further in coastal provinces than in the interior, and by 2011 more than 250 million migrant workers and their dependents had relocated to urban areas to find work. One consequence of population control policy is that China is now one of the most rapidly aging countries in the world. Deterioration in the environment - notably air pollution, soil erosion, and the steady fall of the water table, especially in the North - is another long-term problem. China continues to lose arable land because of erosion and economic development. The Chinese government is seeking to add energy production capacity from sources other than coal and oil, focusing on nuclear and alternative energy development. In 2010-11, China faced high inflation resulting largely from its credit-fueled stimulus program. Some tightening measures appear to have controlled inflation, but GDP growth consequently slowed to near 9% for 2011. An economic slowdown in Europe is expected to further drag Chinese growth in 2012. Debt overhang from the stimulus program, particularly among local governments, and a property price bubble challenge policy makers currently. The government's 12th Five-Year Plan, adopted in March 2011, emphasizes continued economic reforms and the need to increase domestic consumption in order to make the economy less dependent on exports in the future. However, China has made only marginal progress toward these rebalancing goals.

Source : CIA

Company name and address

HUBEI HONGYUAN PHARMACEUTICAL CO., LTD.

no. 428, yishui north road, fengshan town, luotian county,

hubei province 438600 PR CHINA

TEL: 86 (0) 713-5072428/5072024 FAX: 86 (0) 713-5072224

EXECUTIVE SUMMARY

INCORPORATION DATE : jan. 21, 2002

REGISTRATION NO. : 421123000005111

REGISTERED LEGAL FORM : LIMITED LIABILITIES CO.

CHIEF EXECUTIVE : MR. YIN GUOPING (CHAIRMAN)

STAFF STRENGTH : 500

REGISTERED CAPITAL : CNY 20,000,000

BUSINESS LINE : MANUFACTURING

TURNOVER : CNY 733,409,000 (AS OF DEC. 31, 2010)

EQUITIES : CNY 231,985,000 (AS OF DEC. 31, 2010)

PAYMENT : AVERAGE

MARKET CONDITION : COMPETITIVE

FINANCIAL CONDITION : STABLE

OPERATIONAL TREND : STEADY

GENERAL REPUTATION : WELL-KNOWN

EXCHANGE RATE : CNY 6.35=USD 1

Adopted abbreviations:

ANS - amount not stated

NS - not stated

SC - subject company (the company inquired by you)

NA - not available

CNY - China Yuan Renminbi

SC was registered as a limited liabilities co. at local Administration for Industry & Commerce (AIC - The official body of issuing and renewing business license) on Jan. 21, 2002.

Company Status: Limited liabilities co.

This form of business in PR China is defined as a legal person. No more than fifty shareholders contribute its registered capital jointly. Shareholders bear limited liability to the extent of shareholding, and the co. is liable for its debts only to extent of its total assets. The characteristics of this form of co. are as follows:

Upon the establishment of the co., an investment certificate is issued to the each of shareholders.

The board of directors is comprised of three to thirteen members.

The minimum registered capital for a co. is CNY 30,000.

Shareholders may take their capital contributions in cash or by means of tangible assets or intangible assets such as industrial property and non-patented technology.

Cash contributed by all shareholders must account for at least 30% of the registered capital.

Existing shareholders have pre-exemption right to purchase shares of the co. offered for sale by the other shareholders and to subscribe for the newly increased registered capital of the co.

SC’s registered business scope includes manufacturing and selling glyoxylate, lithium hexafluorophosphate; manufacturing and selling API (metronidazole, benzoyl metronidazole, tinidazole, ornidazole, secnidazole), Lu agent, syrup, mixture; manufacturing and selling health care products Ling Tu Fu Shen Brand Fu Qi Ren capsule; wholesaling coal; manufacturing and selling carboxymethylpachymaran, carboxymethylpachymaran granules, capsules, soft capsules, honeysuckle drinks, herbal tea honeysuckle, honeysuckle tablet, drink chrysanthemum, chrysanthemum tea, Poria, Poria cake, Poria fans, chestnuts, canned, canned fruit, sweet persimmons, fresh chestnuts, fresh persimmon; manufacturing and sellin formaldehyde, glyoxal, formic acid; manufacturing and selling pharmaceutical intermediates and fine chemicals; manufacturing and selling sucralose; exporting self-made products and technology; importing raw and auxiliary materials, instruments, meters, mechanical equipment, spare parts and technology used for self-production (excluding the goods and technology prohibited or limited by the country); processing with imported materials, processing with imported samples, assembling with imported parts, and compensation trade in agreement; purchasing agricultural products and retailing general merchandise. (with permit if needed)

SC is mainly engaged in manufacturing and selling active pharmaceutical ingredients and intermediates.

Mr. Yin Guoping has been the legal representative, chairman and general manager since 2002.

SC is known to have approx. 500 employees at present.

SC is currently operating at the above stated address, and this address houses its operating office and factory in the industrial zone of Luotian County. Our checks reveal that SC rents the total premise about 18,000 square meters.

http://www.hbhypharm.com/ The design is professional and the content is well organized. At present it is in both Chinese and English versions.

E-mail: sales@hbhypharm.com

SC has passed ISO9001:2000 and GMP.

Changes of its registered information:

Date of change	Item	Before the change	After the change
2002-5-29	Registered capital	CNY 500,000	CNY 3,148,000
2007-7-3	Registered capital	CNY 3,148,000	Present amount
2008-3-19	Registration number	4211231002149	Present one
2008-8-4	Company name	Luotian Hongyuan Biochemical Co., Ltd.	Present one
Unknown	Shareholdings	Yin Guoping 32.10% Liao Liping 11.76% Fang Ligao 5.96% Other individuals 50.18%	Present ones

MAIN SHAREHOLDERS:

Name % of Shareholding

Yin Guoping 32.10

Liao Liping 11.91

Fang Ligao 5.96

Xiao Jiahuai 5.96

Duan Xiaoliu 5.96

Lei Gaoliang 5.96

Gong Bingtao 5.96

Liu Zhanliang 5.96

Li Xiaoxiong 5.95

Xu Shuangxi 5.95

He Jianping 4.76

Deng Zhihua 3.57

l Legal representative, Chairman and General Manager:

Mr. Yin Guoping , ID# 422125600423001, born in 1960, with university education. He is currently responsible for the overall management of SC.

Working Experience(s):

From 2002 to present Working in SC as legal representative, chairman and general manager

l Deputy General Manager:

Mr. Xu Shuangxi , in his 40’s with university education. He is currently responsible for the daily management of SC.

Working Experience(s):

From 2002 to present Working in SC as deputy general manager

SC is mainly engaged in manufacturing and selling active pharmaceutical ingredients and intermediates.

SC’s products mainly include: Metronidazole, 2-Methyl-5-Nitroimidazole, 2-Methylimidazole, Dimetridazole, Imidazole, 4-Nitroimidazole, and Metronidazole Benzoate, etc.

SC sources its materials 100% from domestic market, mainly Hubei province. SC sells 70% to overseas market, mainly European and American countries, and 30% in domestic market, mainly Hubei and Jiangsu province.

The buying terms of SC include Check, T/T, and Credit of 30-60 days. The payment terms of SC include T/T, L/C, Check and Credit of 30-60 days.

*Major Customer:

==============

Taixing Yuandong Chemical Co., Ltd.

Note: SC’s management declined to release its major suppliers.

SC is known to have the following subsidiaries:

Luotian Hengyuan Pharmaceutical Co., Ltd.

Luotian Hengxingyuan Chemical Co., Ltd.

Etc.

Overall payment appraisal:

( ) Excellent ( ) Good (X) Average ( ) Fair ( ) Poor ( ) Not yet determined

The appraisal serves as a reference to reveal SC's payments habits and ability to pay. It is based on the 3 weighed factors: Trade payment experience (through current enquiry with SC's suppliers), our delinquent payment and our debt collection record concerning SC.

Trade payment experience: SC did not provide any name of trade/service suppliers and we have no other sources to conduct the enquiry at present.

Delinquent payment record: None in our database.

Debt collection record: No overdue amount owed by SC was placed to us for collection within the last 6 years.

Bank of China Luotian Sub-branch

AC#06332508093001

Relationship: Normal.

Financial summary

Unit: CNY’000

	As of Dec. 31, 2009	As of Dec. 31, 2010
Total liabilities	154,893	168,411
Equities	201,842	231,985
Total assets	356,735	400,396
	=============	=============
Turnover	547,146	733,409
Profits	15,857	38,705

Note: we did not find SC’s detailed financial reports for Yr2009 & Yr2010.

Important Ratios

=============

	As of Dec. 31, 2009	As of Dec. 31, 2010
*Liabilities to assets	0.43	0.42
*Net profit margin (%)	2.90	5.28
*Return on total assets (%)	4.45	9.67
*Turnover/Total assets	1.53	1.83

PROFITABILITY: FAIRLY GOOD

l The turnover of SC appears fairly good in its line, and it increased greatly in 2010.

l SC’s net profit margin is average in 2009 and fairly good in 2010.

l SC’s return on total assets is fairly good.

l SC’s turnover is in an average level, comparing with the size of its total assets.

LEVERAGE: AVERAGE

l The debt ratio of SC is low.

l The risk for SC to go bankrupt is average.

Overall financial condition of the SC: Stable.

SC is considered medium-sized in its line with stable financial conditions.

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs.54.29
UK Pound	1	Rs.81.09
Euro	1	Rs.70.61

INFORMATION DETAILS

Report Prepared by :

MNL

RATING EXPLANATIONS

RATING		STATUS	PROPOSED CREDIT LINE
>86	Aaa	Possesses an extremely sound financial base with the strongest capability for timely payment of interest and principal sums	Unlimited
71-85	Aa	Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums	Large
56-70	A	Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums	Fairly Large
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory
26-40	B	Capability to overcome financial difficulties seems comparatively below average.	Small
11-25	Ca	Adverse factors are apparent. Repayment of interest and principal sums in default or expected to be in default upon maturity	Limited with full security
<10	C	Absolute credit risk exists. Caution needed to be exercised	Credit not recommended
----	NB	New Business	----

This score serves as a reference to assess SC’s credit risk and to set the amount of credit to be extended. It is calculated from a composite of weighted scores obtained from each of the major sections of this report. The assessed factors and their relative weights (as indicated through %) are as follows:

Financial condition (40%) Ownership background (20%) Payment record (10%)

Credit history (10%) Market trend (10%) Operational size (10%)

PRIVATE & CONFIDENTIAL : This information is provided to you at your request, you having employed MIPL for such purpose. You will use the information as aid only in determining the propriety of giving credit and generally as an aid to your business and for no other purpose. You will hold the information in strict confidence, and shall not reveal it or make it known to the subject persons, firms or corporations or to any other. MIPL does not warrant the correctness of the information as you hold it free of any liability whatsoever. You will be liable to and indemnify MIPL for any loss, damage or expense, occasioned by your breach or non observance of any one, or more of these conditions

This report is issued at your request without any risk and responsibility on the part of MIRA INFORM PRIVATE LIMITED (MIPL) or its officials.